There are 3 distinct barriers every adviser must manage in their career if they want business success. I am defining “business success” as having more than a job. Success therefore is wanting their job to become their business. Each of the hurdles is a defining point which can see an adviser plateau or even possibly exit.
The first hurdle is simply getting enough new business and clients to earn a living and survive the startup phase as an adviser. Everything is about sales, marketing and broadening the advisers knowledge and skill sets….and putting food on the table. Clearly a well recognised deadly point if an adviser cannot achieve the balance of earning and growing.
The second barrier is nearly as well known and it involves stepping from being effectively (if not legally) a sole trader sales person earning a living to becoming a business. This involves introducing order, structure and leverage into the sales operation in the form of systems, technology and support staff generally. While there are systems and support and probably a brand which is more than the owners personal name or reputation, it does remain dependent on the founders sales and marketing ability generally to keep producing revenue.
The third barrier is transforming the business from one which is dependent on the founders personal sales and client servicing efforts into a practice which supports itself as a business. It is about creating a practice which can be independent of the founders personal sales results.
This is the point where many good practitioners falter.
There are a number of challenges at this point. Amongst them are the following, which are solely the domain of the practitioner to address:
- Parking the ego
- Creating the culture
- Letting go
- Laying out a future
- Creating conformity
One of the toughest things for successful and entrepreneurial advisers to do is step back from being “the main man”. When ones entire advisory career has been built upon being the rainmaker, the decision-maker, the risk-taker and funder of all ideas there is a huge amount of the advisers personality wrapped up in how the practice operates. Managing the transition at this point requires firstly that the founder realises and accepts that the practice has to move beyond being a reflection of themselves. Ego has to be put to one side in order to progress.
Cultural transformation is often required. Transferring management of long-standing client accounts to others in the firm usually has to happen. Promotion of other people’s expertise and proficiency within the firm will be necessary. These are areas where a founders ego often results in the transition failing.
This is also a critical step in establishing the culture of the firm – and you know how important that is. You know that staff leave bad managers more than they leave jobs. You know that people need to feel valued and respected as much as they need a pay-packet to buy groceries and pay mortgages. Leveraging via people means empowering those people…and getting out of their way.
Culture is critical to the establishment of a great practice which will work with or without the founder. It can either be deliberately created or it can be left to chance, but a culture will evolve either way. Far better to do it deliberately and have the culture of the practice become a reflection of your vision and values. Do not leave it evolve of its own accord based upon the values, personalities and experiences of others.
Culture is one thing you do not let go of, but one has to let go and get out of the way on a lot of other things. Management is needed, and they have to be given authority and autonomy to do the work – and manage the people – which they were hired to do. Mistakes and mis-steps will happen…and the founder has to allow that to occur if they genuinely want a business which can operate without being utterly dependent upon them personally. The practice will need to make decisions and invest in many things which those you hired are actually better at doing than you are. Or they should be if you hired well.
“Letting go” means being prepared to back others judgement about how to invest or use the resources you paid for or developed in this respect, which is not necessarily the same as letting go of control of the business. That may seem a fine distinction, however it is an important one for practitioners to understand. Building a great professional practice requires letting go of some operational controls, but not strategic or equity control.
This raises perhaps the most challenging element: use of equity. Opinions will definitely differ on the question of whether founders should be prepared to essentially “give up” equity in their firm to potential partners or successors. I admit that I subscribe to view that one is better giving up some of the equity built up in order to bring in additional skills and leverage which can create a far bigger and more valuable business. That’s the “have a smaller piece of a much bigger cake” line of thinking, but there is merit in the alternative of owning the entire cake and eating whatever you like whenever you like.
What does matter is that you have to make a deliberate strategic decision about how you will use the equity and capital value created thus far to grow the business. Whether that is leveraging the balance sheet to secure debt and go on the acquisition trail, or whether that is using equity to bring in talent, or using retained earnings to invest internally….decisions must be made about how best to use the capital value which has been built up thus far. One of the main reasons why deliberate decisions need to be made at this point is that it may well be a key part of the answer to securing the talent you need to grow the firm beyond your own name and billable hours.
Top talent for your firm will have the right balance of personal values, professional expertise, entrepreneurial or aspirational mind-set and work ethic. That sort of talent has employment choices. You are not the only “opportunity” in town for them, and if a salary is all you put on the table then there is a good chance that another salary offer will have them moving on again at some point.
You have to lay out a future for them. What they get paid, and how it is paid, matters. Providing some upside for exceptional performance matters. Having the right work environment and culture matters. Providing some opportunity for them to excel matters. These are all however just entry-level considerations; they are the components which get a good candidate to simply consider you as a possibility. Miss on these and they won’t consider you at all.
Securing the right talent requires that you look beyond these elements and be prepared to invest in their development and help them grow as people as well as professionals. There should be a clear and certain career path which goes hand-in-hand with that…as they develop as practitioners and as they increase in value to the firm (or your competitors!) there needs to be a corresponding increase in reward. Reward is not just about money though. It is about status and positioning as much as money; and it is about helping them secure their futures. Future ownership – either of your firm or their own – is on the radar screen and it must be addressed. Laying out a future pathway for the right talent is an essential step in getting a professional practice to graduate from a business which depends on the founder to one which will grow exponentially without the founders production.
The final element of breaking through Barrier 3 is creating conformity. For entrepreneurial practitioners who began their careers as hunters and deal-makers this is without doubt the dullest and most mind-numbing component. Transitioning in ones mind from “we’ll work it out as we go, but let’s just keep moving ahead” to “that’s how things are done here by everyone, including me” is a big mental step. The bigger mental barrier though is spending the time developing the processes and systems which ensure consistent service levels and consistent client experiences, and which also provide safety for the firm and its clients.
Balancing the need for safety (compliance and best practice) with delivering consistent service and advice experiences (giving the customers what they want at the standard and price they will pay) is a slow and seemingly never-ending process of incremental adjustment and investment in non-revenue generating cost centres. However, every cent and minute invested in developing conformity within the practice is actually an investment in the intellectual property of the practice. It is not a “cost”; it is an “investment”. It is an investment in future “goodwill”, or “brand value”, or “agency purchase multiple”….call it what you will but the fact is that if one has built a reputable and replicable system of delivering service at best practice standards which happens every time for every client then it is of immense value to the owner (or owners) of the firm.
We are at a point in the evolution of the industry where more and more practitioners have successfully managed the transition from hunter to farmer, and many are now running successful little businesses which are professional and proficient. Many are entirely dependant though on the founder continuing to turn up every week and do the majority of the work which generates revenue. They are earning a living and have a good job.
Transforming that good job into a professional services firm of significant value requires a major adjustment in thinking, with careful planning centred upon addressing the 5 key issues which can inhibit or ensure your success at this point.